Electrification

Electrification is regarded as the pacesetter for economic and social advancement in most developing countries. Electric utilities in Latin America are rapidly expanding their installed capacity and undergoing change, assisted by loans from the World Bank and Inter-American Development Bank.

Total net electricity consumption in Latin America grew throughout the 1980s, reaching 577.8 billion kilowatts in 1989. Brazil was responsible for most of this growth, doubling its electricity consumption from 1980 to 1989. As of 2005, Brazil consumed 415.9 billion kilowatts of electricity annually and produced 546 billion, some of which was exported.

Hydropower represents the largest single supply source for electricity in Latin America. In 1989, 61 percent of all electricity supplied came from hydropower. Brazil has always dominated hydroelectric generation in Latin America and accounted for 60 percent (211.2 billion kilowatt-hours) of the total hydro power generated in 1988. Brazil encouraged electricity-intensive industries such as aluminum smelters to use relatively cheap hydropower, and many industries substituted electricity for imported oil. By the early 1990s, hydro provided almost 90 percent of all electricity generated in Brazil.

In 1988, hydro provided 55 percent of the electricity generated in Venezuela. Ecuador also depends on hydropower from the Paute River for 80 percent of its electricity. Mexico, by contrast, received 20 percent of its electricity from hydro and 59 percent from oil. In 1988, petroleum, natural gas, and coal burned in thermal plants generated 36 percent of the electricity consumed in Latin America in 1988, while geothermal and other sources provided 3 percent. Geothermal development proceeded rapidly during the 1970s and 1980s in Mexico and El Salvador, but remains relatively insignificant.

Like most developing countries, those of Latin America have substantial potential to increase the efficiency of their power systems. Subsidized electricity prices reduce the incentive for energy conservation. Distribution and transformation losses have been increasing to 21.5 percent in 1987. The Inter-American Development Bank is financing electric system upgrades to reduce power outages and losses in Jamaica and Bolivia, among other countries.

Most electricity generation, transmission, and distribution in Latin America is the responsibility of government ministries and corporations, except for self-generation by industrial facilities. Bolivia, Costa Rica, Ecuador, El Salvador, Guyana, Honduras, Mexico, Nicaragua, Panama, Paraguay, Uruguay, and most Caribbean islands have centralized public utilities. Self-generation at aluminum factories, cement plants, sugar mills, and other industrial facilities assists the centralized power sector in Belize, the Dominican Republic, French Guiana, Haiti, Jamaica, and Suriname. Decentralized electric sectors exist in Argentina, Brazil, Colombia, Guatemala, Peru, and Venezuela.

The failure of most state-owned utilities in Latin America to generate sufficient revenues to cover normal expansion has combined with their nations' overall debt problems to place utilities in a precarious position with respect to meeting growing demands. Some countries permit private power generation for distribution by the central grid (Mexico, Argentina, and Costa Rica) and others discuss privatization as an option (El Salvador, Venezuela, and Brazil).

Chile has privatized its electricity sector, keeping only 10 percent of the previously public entity under public ownership. The process was scheduled for completion in 1992 at a cost of $27 million. The U.S. Agency for International Development has encouraged El Salvador to follow Chile's lead and return its distribution companies to the private sector.

In Bolivia in 2006, President Evo Morales signed a decree nationalizing the country's profitable natural gas reserves. Foreign companies with holdings were given six months to renegotiate contracts with the Bolivian government or to leave. Morales's actions echoed those of President Hugo Chavez in regards to the oil deposits in Venezuela. The central idea of these moves is that Latin American energy should be for Latin Americans.

Regional cooperation has developed despite political differences. Grid interconnections exist in Central America, between Mexico and the United States, and in parts of South America. Paraguay has been exchanging electricity with Brazil and Uruguay since 1971 and with Argentina since 1973. Mexico has been selling power from its geothermal plants in Baja California to San Diego (California) Gas and Electric. Further cooperation is likely in the future. In February 1990, Venezuela and Guyana signed an agreement to interconnect their electricity grids. Venezuela was to supply up to 70 percent of Guyana's electricity requirements by 1995, mostly from the Raúl Leoni hydroelectric complex at Guri. In March 1989, Venezuela and Colombia agreed to extend the Maracaibo grid into eastern Colombia.

Rural electrification continues to be an important issue in Latin America, despite the fact that 60 percent of the population live in urban areas. The availability of reliable electric power can substantially increase the ability of rural areas to produce for outside markets. Many countries have found it excessively expensive to extend the central power grid to small, dispersed load centers. As a result, many governments are working with international aid agencies to develop decentralized power, such as mini-and micro-hydroelectric facilities, photovoltaic, and wind.

See alsoChávez, Hugo; Energy; Morales, Evo.

BIBLIOGRAPHY

Mohan Munasinghe, Rural Electrification for Development: Policy Analysis and Applications (1987). Lee Catalano, ed., International Directory of Electric Utilities (1988). Latin American Energy Organization, Energy Balances for Latin America and the Caribbean (1988). U.S. Department Of Energy, 1989 International Energy Annual (1991).

Additional Bibliography

Millán, Jaime. Entre el mercado y el Estado: Tres décadas dereformas en el sector eléctrico de América Latina. Washington, DC: Banco Interamericano de Desarrollo, 2006.

Millán, Jaime, and Nils Fredrick M. von der Fehr. Keeping the Lights On: Power Sector Reforms in Latin America. Washington, DC: Inter-American Development Bank, 2003.

Rudnick, Hugh. Second Generation Electricity Reforms in Latin America and the California Paradigm. Santiago: Pontífica Universidad Católica de Chile, Instituto de Economía, 2002.

                                     Mindi J. Farber